Citing a statement from Espirito Santo,
Bloomberg reported that Espirito is "currently assessing the
financial impact of its exposure.

A man
has his shoes shined near an office of Portuguese bank Banco
Espirito Santo in Lisbon June 20, 2014.REUTERS/Rafael Marchante

Wednesday,
Moody's downgraded the debt ratings of Espirito Santo
Financial Group, which is the largest shareholder of Espirito
Santo International, according to Bloomberg, with Moody's saying
its, "concerns regarding ESFG's creditworthiness are heightened
by the lack of transparency around both the Espirito Santo
Group's financial position and the extent of intra-group linkages
including ESFG's direct and indirect exposure to ESI."

Bloomberg economists David Powell and Maxime Sbaihi said,
"Problems in Portugal's banking sector appear to have
worried investors over the solvency of the
country." Powell and Sbaihi also noted that the
public finances of Portugal are among the most fragile in the
eurozone.

Uncertainty also seems to have reached the Spanish banking sector
as well. According to reports from both
Bloomberg and
The Wall Street Journal, Banco Popular Espanol postponed a
planned debt sale, citing adverse market conditions.

Shares of Banco Popular trading in Madrid were down more than
4%.

The news has also spooked investors who are concerned about how
uncertainty in the Spanish and Portuguese financial sectors could
impact assets across the eurozone.

Bloomberg cited comments from Adrian Miller, director of
fixed-income strategy at GMP Securities, who said in a note to
clients, "Should the Portuguese situation continue to
deteriorate, risk aversion contagion could quickly spread to
other euro zone member states' bonds and other asset classes."

The news of missed debt payments by Espirito Santo International
also comes on the heels of discouraging economic data out of the
eurozone.

Earlier Thursday, inflation data out of France showed that
its economy is teetering. Industrial production fell 3.7% in
May and with consumer prices rising just 0.5% in June, concerns
about deflation risks in France are increasing.

The eurozone's recovery from the sovereign debt crisis has been
about improving situations in the economic bloc's peripheral
economies like Italy and Portugal, and this new batch of
uncertainty in Portugal's financial sector is not sitting well
with investors.